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Buyer Beware of Listing Agent!
By Suzana
October 22, 2017

Why Didn’t I Know the House Was a Lemon?

Have you ever heard a story about someone buying a house, getting an inspection, and then three months later, they find out they have a leaky roof, the sewer is clogged, their air conditioner dies and they can’t run the T.V. and the toaster oven at the same time? Generally, the blame goes to the lousy inspector, right? But does anyone ever ask who represented the buyer in the sale?

It is the buyer’s Realtor (agent) who is supposed to be representing the best interests of their client. This means, offering sound advice about inspections, representing the needs of the buyer, and pushing the issue if necessary, on behalf of the buyer.

I Can Get a Better Deal Working With the Listing Agent, Right?

**When an agent lists a property, the commission the seller pays goes to the listing agent. If that agent places the listing on the MLS, the industry standard is that the total commission is split between listing agent and selling agent. If the listing agent is also the selling agent, then he/she gets the full commission (minus transaction/brokerage fees).**

Have you ever heard that a buyer should try to only deal with the listing agent, to get a better deal? That is perhaps the biggest misconception circling around the real estate industry. Most times, the ONLY party who MIGHT get a better deal when both the buyer and the seller use the same agent is… the SELLER. After all, the seller is the one paying the (commission) bill. Sometimes a listing agent MIGHT give the seller a discount on their commission, since “the transaction is easier since there’s no middle man”. This might translate into one percentage point or less that the seller has to pay in commission. The truth is, yes, it does make it easier for the listing agent to push the deal through because there is no one else they have to worry about making demands on the person who is paying their bills. No middle man might loosely translate into… no buyers’ representative. The motivation for pushing the deal through? All of the commission!

Agents are human… and think about it, unless you know FOR SURE that listing agent is totally remiss of greed, is as truthful and ethical as Mother Theresa (God rest her soul), how can a buyer be sure that their shared agent will have their best interests at heart? Will he/she recommend the most militant of inspectors who will notate every flaw, down to the spider webs in the attic, or will they recommend the inspector who wears the wrong eye glass prescription every time he does an inspection? Will the (listing) agent recommend getting a sewer inspection, roof inspection, HVAC inspection done? Or not? Some folks actually don’t care about inspections, especially if they plan on completely renovating, tearing out or down most or all of the house… they figure all that stuff will be replaced anyway, so for them, perhaps it doesn’t matter. But for the majority of people, buying a home to move into, for the next several years, perhaps wanting to focus on a career or raising their children, or to travel – the last thing they want to focus on is re-habbing a house! So one would think they would want a very stringent inspection, and perhaps several inspections, to make sure they know what they are getting into. But if your representative stands to lose out on a big huge nugget from double dipping on both sides of the transaction, are you certain they would FIGHT for YOU? Or, might they tip the scale here and there in favor of the seller? Are you willing to risk it?

I’m Desperate!

Now, if a buyer is desperate… and I mean desperate to buy a home… for whatever their reason… and they NEED to buy something, anything in a certain timeline… in particular during a season in the market where inventory is very low and multiple offers come in on every property they are interested in…. YES, it might be advantageous to use the listing agent… that is, if your primary objective is just getting the place and beating out the other 14 offers that just came in. As long as your primary objective is NOT getting the best deal – because you’ll be paying above list, like anyone else. The only difference is that the listing agent might push your offer (which could be identical to several others) with the incentive “the transaction is easier since there’s no middle man… so maybe we’ll reduce the commission a bit”. Wink, wink. The seller (who’s paying the bill) will know exactly how motivated (in dollar signs), the listing agent will be to make the deal HAPPEN!

So, yes, in a multiple offer situation, the buyer stands a decent chance of getting their offer accepted. The seller MIGHT save a few bucks on the commission, and the “transaction is easier” on the seller. It’s a win-win for the seller and the listing agent. Buyer beware.

Buying In the Off-Season.

If a buyer is purchasing a home during the off-season, when there’s not as much competition, the houses sit on the market for several months, and the seller is HOPING an offer will come in one day, there is most likely NO advantage to the buyer to use the listing agent; instead, the buyer may actually be at a disadvantage. The seller however might save a few bucks, maybe if the listing agent feels generous (there’s no rule or industry standard governing how much, if any commission reduction a listing agent gives in a dual agency situation). With inventory sitting on the market, the listing agent will likely be highly motivated to close on it. Heaven forbid if an issue came up during inspections and it falls out of escrow. That would just make it even more difficult for the listing agent to sell it a second time around.

Who’s On First? Who’s On Second.

Speaking of dual-agency, that’s actually the phrase the industry uses when a listing agent “double-dips” and represents both seller and buyer. The California Bureau of Real Estate is aware that there COULD BE a conflict of interest in these situations and wants the buyer to be aware of this potential conflict. This is why once you get into a transaction, the Bureau requires both sides to disclose in at least two forms PER SIDE, so usually FOUR documents (and maybe a brokerage form as well) that must be signed by the buyer and seller stating that everyone knows who is representing who. The Bureau wants the buyer to be fully aware they are being “represented” by the same agent who is representing the seller. So in other words, the Bureau is encouraging the buyer to think about it… And buyer beware.

Tips For Dealing With a Listing Agent:

  • If you are working with an agent who is sending you listings and showing you houses, and you happen to call a listing agent or go to an open house, and the listing agent fails to ask you if you are working with another agent, but instead tries to “get you” as their client, beware! Common courtesy in the industry is for the listing agent to ask first, be respectful of other agents by backing off if they are working with someone else. If they are not respectful of other agents, they might not be respectful of their duty to represent the buyer either. Tell the listing agent you are working with someone else, and contact YOUR agent with any questions.
  • If you are not working with any agent to help you purchase a home, and you happen to go to an open house or call about a property you’re interested in, he/she should ask first if you have an agent and they should remind you that unless you are an investor and/or are planning on renovating the place, you might want to consider using another agent as your representative in the sale. This is a great indicator about the way they do business. If they’re honest and ethical, they should tell you that you might be better served using another agent as your representative. Then you can decide if you might want to work with them, as they might be a good choice after all. Investors generally DO prefer using the listing agent in their purchases, as their business is to completely renovate then rent or flip the property. They often do not even conduct ANY inspections, and buy with all cash, so their offers are usually VERY strong and prefer to close quickly, often within 14 days, so for them, cutting “the middle man” out might make sense.
  • If you do decide to use the listing agent to purchase their listed property, do your homework! Do not rely solely on their inspection referrals… get your own. You should have a general building inspection, and possible sewer/septic inspection, roof, HVAC, mold & moisture, geologic (for hillside properties), and chimney inspection (if applicable), dependent upon what disclosures are provided by the owner/seller. Your agent should also check Property Assessor information to make sure the number of bedrooms, bathrooms and square footage matches what is on record. He/she should request permits for any work done on the home on your behalf, and provide the buyer with instructions on obtaining and reviewing the building permits, if none were provided. Your agent should always have YOUR best interest as their top priority – EVEN IF they are also representing the seller. So if they are also supposed to have the seller’s best interest as their top priority (and the seller is paying), well, therein could be the conflict. Buyer beware!